Podcasts
Podcast: Reflections on Insurance Regulation: A Conversation with McGlinchey’s Newest Member, Former Commissioner Donelon, Part 1
Read Time: 10 minsBetween artificial intelligence, extreme weather events, the increasing legalization of cannabis, and a global pandemic, the insurance industry is experiencing a period of upheaval and innovation. Gulf South states like Louisiana have been ground zero for many of the industry’s challenges and advancements.
Lauren Ybarra: My name is Lauren Ybarra, and I’m a Member of McGlinchey Stafford’s insurance regulatory practice team. I’m joined here today by Jim Donelon, the longest-serving insurance commissioner in Louisiana state history, having held the role of Insurance Commissioner from 2006 until 2023. Jim was a member of the state legislature for 20 years before that, which I think is an interesting perspective he brings to the conversation on how laws are crafted, implemented, and ultimately enforced. Thank you, Jim, for joining us today.
Jim Donelon: It’s my honor and pleasure. I look forward to our conversation, Lauren.
Lauren Ybarra: My first question for you is, why come to a law firm after your longest-standing role as insurance commissioner in Louisiana?
Jim Donelon: Well, the short answer is, I have to admit that I’m afraid I’m a workaholic, and I’m afraid to go home with no hobbies and nothing to do. So my opportunity here at McGlinchey – a firm that I’ve been familiar with my entire career, having gone to law school here in New Orleans and practiced law for all those years before going to work full-time as, first, Chief Deputy, and then Commissioner for a 25-year period at the end of my official work life – it was an honor to be invited to join this firm and have the resources behind me that it brings to bear on behalf of the lawyers of the McGlinchey firm. I am also very excited to continue in my role as a lawyer now, helping clients deal with the regulatory scheme that has been in place since McCarran Ferguson was passed in the 1940s and relegated the regulation of insurance to the states and the territories of America. And so I’m really, really thrilled and honored to be able to continue my career here at McGlinchey in the field that I have spent the bulk of my time, legislative as well as regulator, working in.
…it was an honor to be invited to join this firm and have the resources behind me that it brings to bear on behalf of the lawyers of the McGlinchey firm. I am also very excited to continue in my role as a lawyer now, helping clients deal with the regulatory scheme that has been in place since McCarran Ferguson was passed in the 1940s and relegated the regulation of insurance to the states and the territories of America. And so I’m really, really thrilled and honored to be able to continue my career here at McGlinchey in the field that I have spent the bulk of my time, legislative as well as regulator, working in.
Lauren Ybarra: Well, we are most certainly honored and thankful to have you here. You are going to be most valuable.
Let’s move to your role as Commissioner. While you were Commissioner, you got insight into the day-to-day insurance in Louisiana, as well as a peek into what life is like for a Commissioner, and communicated across all 50 states with different Commissioners. What was one of your favorite things about being a Commissioner here in Louisiana and being amongst all the nation’s leaders in insurance?
Jim Donelon: Well, on the local level, when I first started, frankly, the most enjoyable part of my job was interacting with my former colleagues at the legislature. I had served as Vice Chair of the first Committee on Insurance, which had previously been served by the Commerce Committee along with banking and cosmetology and all forms of commerce to include insurance.
But a crisis hit our insurance market in the 1990s. Our consumer safety net of the Guaranty Fund was hit with $150 million in losses when our non-standard auto insurance collapsed. And that created a crisis for the state budget as well as for the insurance market. The then-speaker pulled insurance out, created a new committee of insurance, and appointed me as its first Vice Chair, serving under, frankly, a classmate in law school who was the first chair of that committee; him a Democrat, me a Republican. I served in that role for four years, then over to chairing the committee myself for my final six years in the legislature. I knew everyone, I’d worked with them when I moved to the department and enjoyed very much continuing to work with them for a number of years until there was such turnover, primarily generated by term limits, that I lost that personal relationship at the legislature.
But in the meantime, I started to build a workforce, a staff, if you will, of 40 or so senior staff members, Assistant Deputy Commissioners in property and casualty (P&C), health, licensing, etc., all the areas that make up the typical insurance regulatory department across the states. I had the opportunity to populate that senior staff with people of my choosing as I became Commissioner six years later. I did so, some from within, hiring others from outside the department. By the end of my term as Commissioner last year, when asked what I missed most about the job, it was losing those friends I had surrounded myself with to enable us to work effectively, I think. And I have great pride in how we regulated the insurance industry in all of its parts during my tenure.
By the end of my term as Commissioner last year, when asked what I missed most about the job, it was losing those friends I had surrounded myself with to enable us to work effectively, I think. And I have great pride in how we regulated the insurance industry in all of its parts during my tenure.
Lauren Ybarra: That’s great. Was there anything that stood out to you in your history of working with the National Association of Insurance Commissioners (NAIC) that is most memorable?
Jim Donelon: Absolutely. I had the opportunity in 2013 to serve as the President of the National Association of Insurance Commissioners. That agency, that association, is over 150 years old now. I’m very proud of the fact that I was given the opportunity to be the first from Louisiana and, frankly, still, the only Louisiana commissioner to have served as President of that body.
During that time, the NAIC, along with Congress and the White House, were going through challenges in the implementation of the Affordable Care Act (ACA). As we approached the first deadline for non-compliant health plans that didn’t meet the requirements of a qualified health plan as defined in the Affordable Care Act, millions, literally, millions of individuals across America were being notified by their health insurers that their policy would be canceled by the end of the year. I got a call through our CEO, who I had hired to be CEO of the NAIC, former Governor and Senator Ben Nelson of Nebraska, who got a call from his former colleague in the Senate, then-President Barack Obama, asking him to extend an invitation to me to come to Washington to meet with him in the Oval Office for him to ask me (and through my role as President, my fellow commissioners) to extend the deadline for those non-qualified health plans for another year.
I had the pleasure of meeting with the President and his senior staff, one of whom was the former Governor of Kansas, Kathleen Sebelius, whom I had served with when she was the elected Commissioner in Kansas when I first took office as Commissioner here in Louisiana. She was in the office with us as she was involved in the implementation of the Affordable Care Act. And we had a good meeting with the President. I will remember it always. I have great pictures of myself, Senator Nelson, and my two colleagues, Wayne Goodwin from North Carolina and Tom Leonardi from Connecticut. Goodwin, being an elected Democrat, was very supportive of the Affordable Care Act, which I, and most if not all of my Republican colleagues, were not supportive of, but were supportive of the President’s ask that we extend those non-qualified plans for an additional year.
The President then said, do you have anything you want to address with me? And I said, yes, sir. And that’s why I brought my colleague from Connecticut, Tom Leonardi. He was handling what we call the G Committee, the Global or Geographic Committee, because it had to do with international matters that affected the NAIC. He was actually traveling the world on behalf of our state-based system and receiving pushback from the federal government, the Treasury Department, in our efforts to have our system trump, if you will, the E.U. bank-centric system of regulation of insurance.
There was an internal ongoing battle at the International Association of Insurance Supervisors (IAIS) as to which model would become the model for international regulation of insurance entities. It is very important to us in the states and to our industry because if we had lost that battle, our companies doing business in emerging markets like China, India, and South America would’ve had to keep two sets of books: one for compliance with the solvency regulations of the 50 states plus territories, and another for those other countries using the model of the IAIS, the bank-centric model, as we refer to it, for compliance with regulators in those markets that are rapidly becoming equal to and, in combination, surpassing the volume of insurance sold here in the U.S. and even in our sister countries in Europe, as these emerging markets take more and more capacity for their insurance needs.
The President then said, do you have anything you want to address with me? And I said, yes, sir. And that’s why I brought my colleague from Connecticut, Tom Leonardi. He was handling the G Committee, the Global or Geographic Committee, because it had to do with international matters that affected the NAIC. He was actually traveling the world on behalf of our state-based system and receiving pushback from the federal government, the Treasury Department, in our efforts to have our system trump, if you will, the E.U. bank-centric system of regulation of insurance.
Lauren Ybarra: That’s certainly amazing. I can’t imagine going to the Oval Office at such a huge time in our American history, as well as for the insurance history, when the Affordable Care Act was ultimately rolled out and how that impacted not only health insurers but the insurance industry as a whole. It really shook things up.
Jim Donelon: It did indeed. And one of my memories from that, and I’ve shared it with my colleagues, it was kind of a heady experience to sit in the Oval Office right at the elbow of the President and for him to refer to you as President Donelon. Coming from the President, that was kind of ego-inflating.
Lauren Ybarra: Certainly, certainly. This brings me to our next question: there are all types of commissioners because every state is different. We generally try to regulate insurance in a simplistic way through the National Association of Insurance Commissioners or the NAIC. But in your experience in dealing with the different states and dealing with different types of commissioners, what, in your opinion, is preferable? Is it to have an insurance commissioner who is appointed by the state executive or Governor or one that is elected by the people, and why?
Jim Donelon: I’m asked that question often and throughout my career was asked it wherever I traveled, actually, often. My flippant answer was, like Senator Kerry, I’m not proud to tell you that I voted against that bill before I voted for it. Back when I was a member of the legislature, indeed I did, in different years and different environments. I first thought it should be appointed, not elected. The election process is daunting and challenging, which makes it hard to recruit folks to run for that office. The office is challenging in and of itself, but the election process is even more unpleasant, if you will, than the duties of a regulator.
But as I got to the NAIC, serving as Chief Deputy and often sitting at the table on behalf of our state and then in my own role as Commissioner, and then even beyond that as President of the NAIC, I came soon to really, really believe the elected Commissioner is the preferable route. The reason for that is, in order to be successful in the political arena, one has to beat one’s opponent to the middle ground and demonstrate that you’re not going to be, if you’re from the left, a puppet of the trial lawyers, for example. Or if you’re from the right, a Republican, you’re not going to be a puppet of the insurance industry. That you can reach across the aisle and advocate and protect consumers, even as a Republican, just as you can reach across the aisle as a Democrat and be pro-business in your regulatory approach. And I’ve seen that play out over and over again.
…in my own role as Commissioner, and then even beyond that as President of the NAIC, I came soon to really, really believe the elected Commissioner is the preferable route. The reason for that is, in order to be successful in the political arena, one has to beat one’s opponent to the middle ground and demonstrate that you’re not going to be, if you’re from the left, a puppet of the trial lawyers, for example. Or if you’re from the right, a Republican, you’re not going to be a puppet of the insurance industry. That you can reach across the aisle and advocate and protect consumers, even as a Republican, just as you can reach across the aisle as a Democrat and be pro-business in your regulatory approach.
In addition, the longevity of those of us who are elected – 12 are elected, and the rest are appointed in various forms, mostly by governors, to be a member of their cabinets. The longevity of commissioners that are elected is much longer than that of those who are appointed. The appointed [commissioners] generally last about two to two and a half years on average. The elected [commissioners], I’d say, last, on average, 10 to maybe a dozen years.
I’m going back to the next NAIC meeting to be a speaker on behalf of the Dean of the NAIC, Mike Kreidler of Washington, who I served my entire time with and have a close working relationship with, to compliment him and extoll him at a dinner that’s being held to honor him as he retires from the Washington Department that he has served, I think about 21 to 22 years as Commissioner. I was second to him in longevity, and my colleague next door in Mississippi, Mike Cheney, will now become the Dean as he just got reelected and has been in office for 19 years. Those are common terms for those commissioners that are elected as opposed to the short terms that typically appointees have. It’s a very complicated job, very complex set of things to oversee and learn, and it takes more than two years, frankly, to get your feet on the ground.
Lauren Ybarra: I definitely can understand that, especially when you live in a southern Gulf state that is susceptible to inclement extreme weather conditions.
Well, Jim, thank you so much for being on this podcast and, of course, joining McGlinchey. We have been so honored to have you and utilize your tenure as Commissioner, experience, and knowledge of insurance and how it operates and where it’s going.
Jim Donelon: It’s been my pleasure. Thank you. I look forward to continuing to work with you.
Lauren Ybarra: Well, that’s it. I’m Lauren Ybarra. Thank you for joining us. Until next time.
Stay Tuned for Part Two, where they’ll discuss devastating hurricane damage to Louisiana during Jim’s tenure as Commissioner, the impacts of the international reinsurance market, cyber hacking and ransomware, and the importance of the National Association of Insurance Commissioners.
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